Security giant G4S has slumped to a £170m pre-tax loss as it took a major hit from the cost of settling a scandal in which it overcharged taxpayers for the electronic tagging of offenders.

The FTSE 100 group fell into the red after an “extremely challenging” period as earnings dropped for a second year in a row following the Olympics fiasco of 2012, which saw them reduced to £158m.

It said it was still in “constructive discussions” with the Government over the tagging affair - four months after ministers rejected a £24.1m settlement offer. Rival Serco has since agreed a £68.5m settlement.

A review by G4S of 163 global contracts, which included a provision for the UK tagging contract, calculated a £136m hit to the balance sheet.

The charge was part of £386m in one-off costs the company said it faced, including the result of a review of its assets and liabilities and the costs of restructuring.

Chief executive Ashley Almanza said in a statement yesterday: “This has been an extremely challenging year for G4S.

“We have taken clear action to address long-standing issues and have introduced wide-ranging changes to strengthen our business.”

G4S employs nearly 2,600 people in Yorkshire and the Humber. It provides security at Headingley Carnegie Stadium in Leeds.